EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
by and between
Vital Living, Inc.
and
SkyePharma PLC
Dated as of August 20, 2003
TABLE OF CONTENTS
1. Certain Filings...................................................... 1
2. Purchase and Sale of Securities; Closing............................. 2
2.1 Authorization of Preferred Shares.............................. 2
2.2 Purchase and Sale.............................................. 2
2.3 The Closing.................................................... 2
2.4 Delivery of Convertible Preferred Shares....................... 2
2.5 Delivery of the Registration Rights Agreement.................. 2
3. Representations and Warranties of the Corporation.................... 3
3.1 Organization Standing and Power................................ 3
3.2 Authorization of Preferred Shares.............................. 3
3.3 Authorization of Reserved Common Shares........................ 3
3.4 Capitalization................................................. 4
3.5 Authority...................................................... 5
3.6 No Undisclosed Liabilities..................................... 6
3.7 Deferred Compensation.......................................... 6
3.8 No Changes..................................................... 7
3.9 Taxes.......................................................... 8
3.10 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment and Inventory........................... 8
3.11 Intellectual Property.......................................... 9
3.12 Agreements, Contracts and Commitments.......................... 9
3.13 Interested Party Transactions.................................. 11
3.14 Governmental Authorization..................................... 11
3.15 Litigation..................................................... 12
3.16 Brokers' and Finders' Fees..................................... 12
3.17 Employee Benefit Plans and Compensation........................ 12
3.18 Environmental Matters.......................................... 13
3.19 Insurance...................................................... 14
3.20 Compliance with Laws........................................... 14
3.21 Disclosure..................................................... 14
3.22 Stock Exchange Documents; Corporation Financial
Statements; Other Representations.............................. 14
3.23 Acknowledgement Regarding Securities........................... 15
3.24 Agreements Regarding Confidential Information,
Proprietary Information and Intellectual Property.............. 15
3.25 Registration Rights............................................ 15
3.26 Rights of First Refusal; Voting and Registration Rights........ 16
3.27 Issuances Exempt............................................... 16
3.28 No Integrated Offering......................................... 16
3.29 Securities Offerings........................................... 17
3.30 Investment Company Act......................................... 17
3.31 Nevada Corporate Statutes...................................... 17
3.32 Use of Proceeds................................................ 18
4. Representations and Warranties of the Purchaser...................... 18
4.1 Due Organization............................................... 18
4.2 Authorization; Execution and Delivery of Agreement............. 18
4.3 No Consent or Approval Required................................ 18
4.4 Brokers' and Finders' Fees..................................... 18
4.5 Access to Information.......................................... 18
4.6 Acquisition For Own Account.................................... 19
4.7 Accredited Investor............................................ 19
5. Conditions to Obligations of the Purchaser at the Closing
under this Agreement................................................. 19
5.1 Corporate Proceedings; Consents; Etc........................... 20
5.2 Blue Sky Matters............................................... 20
5.3 Registration Rights Agreement.................................. 20
5.4 Merger Agreement............................................... 20
5.5 Filings and Documents.......................................... 20
5.6 Regulatory Approvals........................................... 20
5.7 Representations, Warranties and Covenants...................... 21
5.8 No Litigation.................................................. 21
5.9 No Prohibition................................................. 21
5.10 Opinion of Counsel............................................. 21
6. Conditions to Obligations of Corporation at the Closing
under this Agreement................................................. 21
6.1 Representations and Warranties................................. 21
6.2 Registration Rights Agreement.................................. 21
6.3 No Litigation.................................................. 22
6.4 No Prohibition................................................. 22
7. Covenants ........................................................... 22
7.1 Insurance...................................................... 22
7.2 Ongoing Filing Requirements.................................... 22
7.3 Public Disclosure of Transactions.............................. 22
7.4 Information Rights............................................. 22
7.5 Nevada Corporate Statutes...................................... 24
8. Indemnification; Survival............................................ 24
8.1 Indemnification by the Corporation............................. 24
8.2 Indemnification by the Purchaser............................... 24
8.3 Procedures Relating to Third Party Claims...................... 24
8.4 Survival of Representations, Warranties and Agreements......... 25
9. Expenses............................................................. 25
10. Notices.............................................................. 25
11. Successors and Assigns............................................... 27
12. Amendments........................................................... 27
13. Entire Agreement..................................................... 27
14. Termination.......................................................... 27
15. Counterparts......................................................... 27
16. Headings............................................................. 27
17. Governing Law; Submission to Jurisdiction; Selection of Forum........ 28
VITAL LIVING, INC.
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") dated as of August 20,
2003 by and between Vital Living, Inc., a Nevada corporation (the
"Corporation"), and SkyePharma PLC, a company incorporated under the laws of
England and Wales (the "Purchaser").
WHEREAS, the Purchaser will acquire 14,204,548 shares of the
Corporation's Common Stock pursuant to the merger of e-nutriceuticals, Inc.
("ENI") with the Corporation (the "Merger"), subject to the terms and conditions
set forth in the Agreement and Plan of Merger (the "Merger Agreement") between
the Corporation, VLEN Acquisition Corp., Inc., a wholly-owned subsidiary of the
Corporation, and ENI, dated as of the date hereof;
WHEREAS, the Purchaser wishes to purchase from the Corporation, and
the Corporation wishes to sell to the Purchaser, 1,000,000 shares of the
Corporation's Series D Convertible Preferred Stock, at a price of US$1.00 per
share of Convertible Preferred Stock, subject to the terms and conditions set
forth herein; and
WHEREAS, the Purchaser and the Corporation are entering into this
Agreement to provide for such purchase and sale and to establish various rights
and obligations in connection therewith.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, and other good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. CERTAIN FILINGS
The Corporation has filed with the Secretary of State of the State
of Nevada (a) the Amended and Restated Articles of Incorporation of the
Corporation in the form of EXHIBIT A attached hereto (the "Articles of
Incorporation"), pursuant to which the Board of Directors of the Corporation is
authorized to establish a series of preferred stock consisting of 1,000,000
shares, par value $0.001 per share, to be designated as Series D Convertible
Preferred Stock of the Corporation (the "Convertible Preferred Stock") and (b) a
Certificate of Designations, Preferences and Relative, Participating, Optional
or Other Special Rights of Series D Convertible Preferred Stock of the
Corporation, in the form of EXHIBIT B attached hereto (the "Certificate of
Designations"), designating the voting powers, designations, preferences and
other special rights, and qualifications, limitations and restrictions of the
Convertible Preferred Stock.
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2. PURCHASE AND SALE OF SECURITIES; CLOSING
2.1 Authorization of Preferred Shares
On the terms and subject to the conditions hereof the Corporation
has authorized the issuance of an aggregate of 1,000,000 shares of Convertible
Preferred Stock (the "Preferred Shares") and has authorized the reservation of
that number of shares of common stock of the Corporation (the "Common Stock")
which will be issuable upon conversion of the Preferred Shares (the "Reserved
Common Shares").
2.2 Purchase and Sale
At the Closing (as defined herein), upon the terms and subject to
the conditions hereinafter set forth, the Corporation will sell to the Purchaser
and the Purchaser shall purchase from the Corporation, one million newly-issued
shares of Convertible Preferred Stock at a purchase price of $1.00 per share and
$1,000,000 in the aggregate.
2.3 The Closing
The closing (the "Closing") hereunder with respect to the Preferred
Shares will take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, New
York, New York on the date of the execution of this Agreement, subject to the
prior satisfaction or waiver of all conditions set forth in Sections 5 and 6
hereof (other than any such conditions which, by their terms, cannot be
satisfied until the Closing), or at such other time and place as the Corporation
and the Purchaser may agree. The date on which the Closing occurs is referred as
to the "Closing Date".
2.4 Delivery of Convertible Preferred Shares
At the Closing, the Corporation shall deliver to the Purchaser a
stock certificate representing one million shares of Convertible Preferred
Stock, registered in the name of the Purchaser, or at the direction of the
Purchaser, in the name of one of its affiliates, and dated the Closing Date,
against payment in full of the Purchase Price (defined below) to be satisfied by
receipt by the Corporation of a certified or official bank check payable to the
Corporation, or a wire transfer of immediately available funds, to an account
designated by the Corporation at least one business day prior to the Closing
Date of $1,000,000 (the "Purchase Price").
2.5 Delivery of the Registration Rights Agreement
At the Closing, the Corporation and the Purchaser shall deliver to
the other duly executed copies of even date herewith of the Registration Rights
Agreement, by and between the Corporation and the Purchaser, in the form
attached hereto as EXHIBIT C (the "Registration Rights Agreement").
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3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
For the purpose of inducing the Purchaser to enter into this
Agreement and to approve the Merger contemplated in the Merger Agreement, the
Corporation represents and warrants to the Purchaser subject to the exceptions
specifically disclosed in the disclosure schedule, set forth as Exhibit D hereto
(referencing the appropriate section number) supplied by the Corporation (the
"Disclosure Schedule"), as follows:
3.1 Organization Standing and Power
The Corporation is a corporation duly organized, validly existing
and in good standing under the laws of Nevada. The Corporation has the corporate
power to own its properties and to carry on its business as now being conducted
and is duly qualified to do business and is in good standing in Arizona and each
other jurisdiction in which the failure to be so qualified would have a material
adverse effect on the ability of Corporation to consummate the transactions
contemplated hereby.
3.2 Authorization of Preferred Shares
The issuance, sale and delivery of the Preferred Shares have been
duly authorized by all requisite corporate action of the Corporation; and the
Preferred Shares have been duly authorized and duly reserved for issuance
pursuant to this Agreement, and when issued, sold and delivered in accordance
with the terms of this Agreement and the Certificate of Designations, the
Preferred Shares will be validly issued and outstanding, fully paid and
nonassessable and will not create or vest any preemptive or other similar
rights, or cause any adjustment in the number of securities issuable pursuant
to, or the conversion or exercise price of, any outstanding rights to purchase,
acquire or subscribe to shares in the Corporation or securities convertible into
shares of the Corporation by any of the beneficial holders of shares of the
Corporation or any securities convertible into, or exercisable for, shares of
the Corporation, and will be free and clear of all liens, pledges, charges,
claims, security interests or other encumbrances of any sort ("Liens").
3.3 Authorization of Reserved Common Shares
The Reserved Common Shares have been duly authorized and duly
reserved for issuance upon conversion of the Preferred Shares. When and if
issued, sold and delivered in accordance with the terms of the Certificate of
Designations, the Reserved Common Shares will be duly authorized, validly issued
and outstanding, fully paid and nonassessable and will not create or vest any
preemptive or other similar rights, or cause any adjustment in the number of
securities issuable pursuant to, or the conversion or exercise price of, any
outstanding rights to purchase, acquire or subscribe to shares in the
Corporation or securities convertible into shares of the Corporation by any of
the beneficial holders of shares of the Corporation or any securities
convertible into, or exercisable for, shares of the Corporation, and will be
free and clear of all Liens.
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3.4 Capitalization
(a) The authorized capital stock of the Corporation consists solely
of 100,000,000 shares of Common Stock, par value $0.001 per share (the
"Common Stock"), of which 21,267,116 shares are issued and outstanding,
and 50,000,000 shares of Preferred Stock, par value $0.001 per share
("Preferred Stock"), of which 5,592,488 shares are issued and outstanding.
All of the outstanding shares of Common Stock and Preferred Stock of the
Corporation have been duly authorized, validly issued, fully paid and
non-assessable and are not subject to preemptive rights.
(b) Section 3.4(b) of the Disclosure Schedule sets forth the capital
structure of the Corporation (computed without taking into account the
full-ratchet anti-dilution adjustments for the warrants issued to ▇▇▇▇▇▇
▇▇▇▇▇▇ (i) which will be cancelled and of no further force and (ii) in
place of which a finite number of warrants shall be established as set
forth in Section 3.4(c) of the Disclosure Schedule, as of the Effective
Time as defined in the Merger Agreement). Except as set forth in Section
3.4(b) of the Disclosure Schedule there are no (i) outstanding warrants,
options, agreements, convertible securities or other commitments or
instruments pursuant to which the Corporation is or may become obligated
to issue or sell any shares of capital stock or other securities of the
Corporation, (ii) equity interests, stock appreciation rights, phantom
stock, profit participation rights or other equity or equity derivative
security of any kind of the Corporation, (iii) preemptive or similar
rights to purchase or otherwise acquire shares of capital stock of the
Corporation pursuant to any provision of law, the Articles of
Incorporation or Bylaws of the Corporation or any agreement to which the
Corporation is party or otherwise, (iv) obligation (contingent or
otherwise) of the Corporation to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof or (v) voting trusts,
voting agreements, proxies or other agreements or instruments with respect
to the voting of the Corporation's Common Stock or other securities to
which the Corporation is a party, or to the best knowledge of the
Corporation, among or between any individual, corporation, partnership,
limited liability company, joint venture association, joint-stock company,
trust, unincorporated organization or government or other agency or
political subdivision thereof (any "Persons") other than the Corporation.
(c) Section 3.4(c) of the Disclosure Schedule sets forth the
post-merger capital structure of the Corporation, on a fully diluted
basis, as it will exist upon consummation of the Closing. Upon
consummation of the Closing, the Corporation will have 54,965,726 shares
of Common Stock issued and outstanding and 6,592,488 shares of Preferred
Stock issued and outstanding. If all of the shares of Common Stock
issuable after consummation of the Merger Agreement and assuming the
conversion of all securities convertible at any time into shares of Common
Stock and the exercise of all options or warrants or other rights to
purchase or receive shares of the Common Stock, whether or not
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immediately exercisable, as described in Section 3.4(c) of the Disclosure
Schedule, were issued, the Corporation would have 81,379,212 shares of
Common Stock issued and outstanding, not including the Contingent Equity
Issuances (as defined in Section 3.4(b) of the Disclosure Schedule) and
options exercisable into 600,000 shares of Common Stock under the
Christopher's Original Formulas, Inc. incentive compensation arrangements.
Upon the purchase and sale of the Preferred Shares described herein, in
combination with the shares of Common Stock to be acquired by the
Purchaser pursuant to the Merger Agreement, the Purchaser will hold at
least 18.68% of the fully diluted Common Stock, assuming for purposes of
this Section 3.4(c) the conversion of all securities convertible at any
time into shares of Common Stock and the exercise of all options or
warrants or other rights to purchase or receive shares of the Common
Stock, whether or not immediately exercisable, as set forth in the third
sentence of this paragraph. It shall not be a breach of this Section
3.4(c) if the number of shares of Common Stock listed in the third
sentence of this paragraph is inaccurate up to a maximum of 100,000 shares
of Common Stock in the aggregate.
(d) Except for its ownership of 100% of the capital stock of Nature
Systems Inc. and VLEN Acquisition Corp., Inc. and 100% of the limited
liability company interests of MAF BioNutritionals, LLC (the
"Subsidiaries"), the Corporation does not own and has not owned any
interest, beneficially or of record, in any corporation, partnership,
joint venture or organization, whether incorporated or unincorporated.
3.5 Authority
The Corporation has all requisite power and authority to enter into
this Agreement, the Registration Rights Agreement, the Merger Agreement and the
Assignment and Assumption Agreement executed on the date hereof by ENI, the
Purchaser and the Corporation (collectively, the "Transaction Agreements"), as
applicable, and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of the Transaction Agreements and the consummation of
the transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of the Corporation. The Corporation's Board of
Directors has duly approved the Transaction Agreements, as applicable. This
Agreement has been duly executed and delivered, and the other Transaction
Agreements, when delivered, will have been duly executed and delivered by the
Corporation and constitute valid and binding obligations of the Corporation,
enforceable in accordance with their terms except as such enforceability may be
limited by principles of public policy and subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies. The execution and delivery of the Transaction Agreements by
the Corporation and the consummation of the transactions contemplated thereby do
not conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation, modification or acceleration of any obligation or
loss of any benefit under (any such event, a "Conflict") (i) any provision of
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the Articles of Incorporation of the Corporation or the Subsidiaries, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
material agreement or instrument applicable to the Corporation or the
Subsidiaries or its or their properties or assets. No consent, waiver, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other federal, state, county,
local or foreign governmental authority, instrumentality, agency or Commission
("Governmental Entity") or any third party or any shareholder or shareholders of
the Corporation, including a party to any agreement with the Corporation or the
Subsidiaries (so as not to create or cause any Conflict), is required by or with
respect to the Corporation or the Subsidiaries in connection with the execution
and delivery of the Transaction Agreements or the consummation of the
transactions contemplated thereby (including in order so that the securities
issued by the Corporation pursuant to the Transaction Agreements shall be free
and clear of any restrictions imposed on the Purchaser under the laws of Nevada
or any other statute that are not imposed generally upon the holders of each
security and that the Purchaser shall have available to it all rights and
privileges of the securities which any other stockholder of the Corporation
could exercise) except for such consents, waivers, approvals, orders,
authorizations, registrations, declarations, and filings as may be required
under applicable securities laws thereby.
3.6 No Undisclosed Liabilities
Except as set forth in Section 3.6 of the Disclosure Schedule, to
the best knowledge of the Corporation, except for obligations incurred in the
ordinary course of business which are not material and not required under U.S.
generally accepted accounting principles ("GAAP") to be set forth or reflected
on a balance sheet or the notes thereto, neither the Corporation nor the
Subsidiaries have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (whether or not required to be reflected
in financial statements in accordance with GAAP), which individually or in the
aggregate, (i) has not been reflected in the Corporation's financial statements
as filed in the Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 (the "Annual Report") and the Corporation's Quarterly
Report on Form 10-Q for the three months ended March 31, 2003 (the "Quarterly
Report"), or (ii) has not been specifically described in this Agreement and
specifically identified herein as not being included in such financial
statements.
3.7 Deferred Compensation
Other than ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇,
there are no employees, directors and consultants who are eligible for any
deferred compensation, bonuses, profit participation or expenses payable to the
employee, director or consultant. No compensation is owed by the Corporation or
the Subsidiaries to such individuals or to any other employees, directors or
consultants of the Corporation or the Subsidiaries other than ordinary payroll
payable by the Corporation at the end of each pay period. Additionally, each of
the individuals set forth above are eligible by the terms of their employment
agreements to participate in a plan allocating 6% of the
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Corporation's pre-tax profit, if and when such a plan is adopted by the
Corporation's Board of Directors.
3.8 No Changes.
Except as set forth in Section 3.8 of the Disclosure Schedule, since
June 30, 2003, neither the Corporation nor any Subsidiary has suffered any
change or development which has had a material adverse effect or has conducted
their respective businesses other than in the ordinary and usual course
consistent with past practices and has not:
(a) sold, leased, transferred or otherwise disposed of any of the
assets (other than dispositions in the ordinary course of business
consistent with past practices);
(b) terminated or amended in any material respect any material
contract or lease to which the Corporation or any Subsidiary is a party or
to which the Corporation or any Subsidiary is bound or to which the
Corporation's or any Subsidiary's properties are subject;
(c) suffered any loss, damage or destruction, whether or not covered
by insurance, which has had a material adverse effect;
(d) made any change in the accounting methods or practices the
Corporation or any Subsidiary follows, whether for general, financial or
tax purposes;
(e) incurred any liabilities (other than in the ordinary course of
business or contractual liabilities) which, individually or in the
aggregate, have had a material adverse effect;
(f) incurred, created or suffered to exist any Liens (other than
non-material Liens) on the Corporation's or any Subsidiary's assets;
(g) increased the compensation payable, or to become payable, to any
of the Corporation's or any Subsidiary's officers or employees or
increased any bonus, severance, accrued vacation, insurance, pension or
other employee benefit plan, payment or arrangement made by the
Corporation or any Subsidiary for or with any such officers or employees
out of the ordinary course of business;
(h) suffered any labor dispute, strike, or other work stoppage;
(i) made or obligated the Corporation or any Subsidiary to make any
capital expenditures in excess of $50,000 individually;
(j) entered into any contract or other agreement requiring the
Corporation or any Subsidiary to make payments in excess of $50,000
individually;
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(k) other than as disclosed in the Registration Statement on Form
SB-2/A of the Corporation filed on July 22, 2003 (the "Registration
Statement"), paid any dividends, whether in cash or property, on account
of, or repurchased any of, the Common Stock; or
(l) entered into any agreement to do any of the foregoing.
3.9 Taxes
The Corporation and each Subsidiary have filed all Tax Returns and
paid all Taxes shown thereon to be due, if any, that are required to have been
filed on or before the Closing with appropriate federal, state, foreign, county
and local governmental agencies or instrumentalities, except where the failure
to do so would not have a material adverse effect upon the business of the
Corporation or any Subsidiary. As of the date hereof, there are not pending or,
to the best knowledge of the Corporation threatened, any audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters. There
are not, to the best knowledge of the Corporation, any unresolved questions or
claims concerning the Corporation's Tax liability that are reasonably likely to
have a material adverse effect on the business of the Corporation. Neither the
Corporation nor any Subsidiary has any liability with respect to any income,
payroll, withholding, franchise or similar Taxes.
As used in this Agreement, (i) the term "Tax" (including, with
correlative meaning, the terms "Taxes" and "Taxable") includes all federal,
state and local income, profits, franchise, gross receipts, environmental,
customs duty, capital stock, severances, stamp, payroll, withholding, excise,
production, value added, occupancy and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts and any interest in respect of such penalties and
additions, and (ii) the term "Tax Return" includes all returns and reports
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax authority relating to
Taxes.
3.10 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment and Inventory
(a) The Registration Statement contains a true, accurate and
complete list of all real property currently leased by the Corporation and
any Subsidiary, the name of the lessor, the date of the lease and each
amendment thereto and the aggregate annual rental and/or other fees
payable under any such lease. All such leases are in full force and
effect, are valid and effective in accordance with their respective terms,
and there is not, under any of such leases, any existing default or event
of default (or event which with notice or lapse of time, or both, would
constitute a default). Neither the Corporation nor any of its Subsidiaries
owns any real property.
(b) Each of the Corporation and the Subsidiaries has good and valid
title to, or, in the case of leased properties and assets, valid leasehold
interests in,
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all of its tangible properties and assets as defined below free and clear
of any Liens, except (i) as reflected in the Registration Statement, (ii)
for liens for taxes not yet due and payable and such imperfections of
title, (iii) for encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the
value, or materially interfere with the present use, of the property
subject thereto or affected thereby, and (iv) all Liens on any asset of
the Corporation, as set forth on Section 3.10(b) of the Disclosure
Schedule.
3.11 Intellectual Property
Section 3.11 of the Disclosure Schedule sets forth a complete list
of all patents or patents pending or any trademark, tradenames, service marks
and copyrights of the Corporation and its Subsidiaries (the "Intellectual
Property Rights" and individually, an "Intellectual Property Right"), and any
applications therefor in respect of any of the foregoing, included in the
Intellectual Property Rights, and specifies, where applicable, the jurisdictions
in which each such Intellectual Property Right has been issued or registered or
in which an application for such issuance and registration has been filed,
including the respective registration or application numbers and the names of
all registered owners. No claims with respect to the Intellectual Property
Rights have been asserted against the Corporation or any Subsidiary, nor are
threatened against the Corporation or any Subsidiary or have been asserted or
threatened against a third party, nor is the Corporation or any Subsidiary
aware, except as disclosed on Section 3.11 of the Disclosure Schedule, of any
reasonable basis for any claims (i) against the use by the Corporation or any
Subsidiary of any distribution rights, trademarks, service marks, trade names,
trade secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in the Corporation's or any Subsidiary's business
as currently conducted or (ii) challenging the validity, effectiveness, or
ownership by the Corporation or any Subsidiary of any of the Intellectual
Property Rights. All registered patents, trademarks, service marks and
copyrights held by the Corporation and each Subsidiary are valid and subsisting.
To the knowledge of the Corporation and its Subsidiaries, there is no
unauthorized use, infringement or misappropriation of any of the Intellectual
Property Rights owned by the Corporation or any Subsidiary by any third party,
including any employee or former employee of the Corporation or any Subsidiary.
No Intellectual Property Right or product of the Corporation or any Subsidiary
is subject to any outstanding decree, order, judgment, or stipulation
restricting in any manner the licensing thereof by the Corporation or any
Subsidiary. Neither the Corporation nor any Subsidiary has entered into any
agreement under which the Corporation or any Subsidiary is restricted from
selling, licensing or otherwise distributing any of its products to any class of
customers, in any geographic area, during any period of time or in any segment
of the market other than as described in the Registration Statement.
3.12 Agreements, Contracts and Commitments.
Except as set forth in Section 3.12 of the Disclosure Schedule,
neither the Corporation nor any of its Subsidiaries has continuing obligations
under, is not a party to nor is it bound by:
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(a) any collective bargaining agreements;
(b) any agreements or arrangements that contain any severance pay or
post-employment liabilities or obligations;
(c) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements;
(d) any employment, sales or consulting agreement, contract or
commitment with an employee, individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization;
(e) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by the Transaction Agreements or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by the Transaction Agreements, except as
provided herein;
(f) any fidelity or surety bond;
(g) any lease of personal property having annual lease payments
individually in excess of $50,000;
(h) any agreement of indemnification or guaranty other than in the
ordinary course of business;
(i) any agreement, contract or commitment containing any covenant
limiting the freedom of the Corporation or any Subsidiary to engage in any
line of business or to compete with any Person;
(j) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $50,000;
(k) any agreement, contract or commitment relating to the
disposition or acquisition of material assets or any interest in any
business enterprise outside the ordinary course of the Corporation's
business;
(l) any purchase order or contract for the purchase of raw materials
involving $50,000 or more;
(m) any construction contracts;
(n) any agreement, contract or commitment, including distribution or
agency or sales representative agreements, with any party which, during
the last two fiscal years of the Corporation, accounted for, or is
expected to account
10
during the Corporation's current fiscal year, for more than five percent
(5%) of the Corporation's revenue or trade payables;
(o) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of
money or extension of credit.
Each of the Corporation and its Subsidiaries has not breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted under, any of the material terms or conditions of (i) any
agreement, contract or commitment set forth in Section 3.12 of the Disclosure
Schedule, or (ii) any other material agreement, contract or commitment to which
it is a party or by which it is bound (any such agreement, contract or
commitment, a "Contract"). Each Contract is in full force and effect and, except
as otherwise disclosed in Section 3.12 of the Disclosure Schedule, is not
subject to any default thereunder of which the Corporation is aware by any party
obligated to the Corporation or any Subsidiary pursuant thereto, other than late
payments. Each of the Corporation and its Subsidiaries has obtained all
necessary consents, waivers and approvals of parties to any Contract as are
required in connection with the transactions contemplated by the Transaction
Agreements, or as are required or advisable in order to remain in effect without
modification after the transactions contemplated by the Transaction Agreements.
Each Contract requiring any consent, waiver or third-party approval as a result
of the transactions contemplated by the Transaction Agreements is disclosed in
Section 3.12 of the Disclosure Schedule. Neither the execution of the
Transaction Agreements nor consummation of the transactions contemplated thereby
will cause any default or breach under any Contract, including without
limitation any key man clause in any Contract, or the acceleration of any
payment obligation of the Corporation or any Subsidiary.
3.13 Interested Party Transactions
Except as disclosed in the section entitled "Certain Transactions
and Related Transactions" in the Registration Statement, no officer, director or
employee or stockholder (nor any spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has or has had an
interest), has or has had, directly or indirectly, (i) an interest in any entity
which furnished or sold, or furnishes or sells, services or products that the
Corporation or any Subsidiary furnishes or sells, or proposes to furnish or
sell, or (ii) any interest in any entity that purchases from or sells or
furnishes to, the Corporation or any Subsidiary any goods or services or (iii) a
beneficial interest in any contract or agreement with the Corporation or any
Subsidiary, other than ▇▇▇▇▇▇ ▇▇▇▇, who will be receiving a portion of the
proceeds of the compensation arrangements with HCFP ▇▇▇▇▇▇▇ Securities described
in Section 3.16, in his capacity as a principal of Aegis Capital Corp.
3.14 Governmental Authorization
Each material consent, license, grant, permit or other authorization
issued to the Corporation or any Subsidiary by any Governmental Entity (i)
pursuant to which
11
the Corporation or any Subsidiary currently operates or holds any interest in
any of its properties or (ii) which is required for the operation of its
business or the holding of any such interest (herein collectively called
"Corporation Authorizations") are in full force and effect. The Corporation
Authorizations constitute all Corporation Authorizations required to permit the
Corporation and its Subsidiaries to operate or conduct their business or hold
any interest in their properties or assets.
3.15 Litigation
There is no action, suit, claim or proceeding of any nature pending,
or threatened against the Corporation or any Subsidiary, its properties or any
of its officers or directors, in their capacities as agents of the Corporation
or any Subsidiary. To the best knowledge of the Corporation, there is no
investigation pending or threatened against the Corporation or any Subsidiary,
its properties or any of its officers or directors, in their capacities as
agents of the Corporation or any Subsidiary by or before any Governmental
Entity. No Governmental Entity has at any time challenged or questioned the
legal right of the Corporation or any Subsidiary to manufacture, offer or sell
any of its products in the present manner or style thereof.
3.16 Brokers' and Finders' Fees
Other than the issuance to HCFP ▇▇▇▇▇▇▇ Securities of 1,150,000
shares of Common Stock and $150,000 as payment for advisory services, and
$60,000 which remains owing to HCFP ▇▇▇▇▇▇▇ Securities as payment for previously
delivered advisory services and will be paid upon the Closing, neither the
Corporation nor any Subsidiary has incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with the Transaction Agreements or any
transaction contemplated thereby or hereby.
3.17 Employee Benefit Plans and Compensation
(a) No employee of the Corporation or any Subsidiary is in violation
of any term of any employment contract, patent disclosure agreement or any
other contract or agreement relating to the relationship of any such
employee with the Corporation or any Subsidiary or any other party as a
result of the nature of the business presently conducted or proposed to be
conducted by the Corporation or any Subsidiary. Neither the Corporation
nor any Subsidiary has any collective bargaining agreement covering any of
its employees.
(b) Neither the Corporation nor any Subsidiary has any employee
benefit plan covering employees, whether subject to ERISA or otherwise.
(c) Neither the Corporation nor any entity which is considered one
employer with the Corporation under Section 4001 of ERISA or Section 414
of the Code has ever maintained or contributed to any employee benefit
plan subject to Title IV of ERISA. All contributions required to be made
under the terms of any plan have been timely made or have been reflected
on the Corporation's financial statements.
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(d) Neither the Corporation nor any Subsidiary has any obligations for
retiree health and life benefits under any benefit plan.
(e) The consummation of the transactions contemplated by this Agreement
and the Transaction Agreements will not (x) entitle any employees to severance
pay or (y) accelerate the time of payment or vesting or trigger any payment or
funding (through a grantor trust or otherwise) of compensation or benefits
under, increase the amount payable or trigger any other material obligation
pursuant to, any of the Corporation's or Subsidiary's employee benefit plans.
3.18 Environmental Matters
(a) Except as would not, individually or in the aggregate, have a material
adverse effect on the Corporation:
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has
been filed, no penalty has been assessed, and no
investigation, action, claim, suit, proceeding or review is
pending or, to the best knowledge of the Corporation or its
Subsidiaries, is threatened by any governmental entity or
other Person relating to or arising out of any Environmental
Law (as defined below);
(ii) each of the Corporation and any Subsidiary is and has been in
compliance with all Environmental Laws and all Environmental
Permits (as defined below); and
(iii) there are no liabilities of or relating to the Corporation or
any Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise
arising under or relating to any Environmental Law and there
are no facts, conditions, situations or set of circumstances
which could reasonably be expected to result in or be the
basis for any such liability.
(b) "Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any governmental authority or
other third party, relating to human health and safety or the environment and
arising from the use, presence, disposal, discharge or release of pollutants,
contaminants, wastes or chemicals or any toxic, radioactive, ignitable,
corrosive, reactive or otherwise hazardous substances, wastes or materials.
"Environmental Permits" means, with respect to any Person, all permits,
licenses, franchises, certificates, approvals and other similar authorizations
of governmental
13
authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the business of such Person as currently conducted.
3.19 Insurance
The Corporation maintains insurance policies and fidelity bonds covering
the assets, business, equipment, properties, operations, employees, officers and
directors of the Corporation and its Subsidiaries that provide full and adequate
coverage for its business. There is no claim by the Corporation or any
Subsidiary pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and the Corporation and any Subsidiary are otherwise in material compliance
with the terms of such policies and bonds. The Corporation has no knowledge of
any threatened termination of, or material premium increase with respect to, any
of such policies.
3.20 Compliance with Laws
Each of the Corporation and each Subsidiary has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
foreign, federal, state or local statute, law or regulation.
3.21 Disclosure
Neither this Agreement nor any exhibit or schedule hereto nor any
statement, document, list or certificate delivered or shown to Purchaser
pursuant hereto or pursuant to any request therefor, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances in which they were made, not misleading. Nothing contained in this
Section 3.21 shall diminish or derogate from any of the other representations
and warranties of the Corporation contained in this Section 3.
3.22 Stock Exchange Documents; Corporation Financial Statements; Other
Representations
The Corporation has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the United States Securities
and Exchange Commission (the "SEC") pursuant to the reporting requirements of
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder, (the "Exchange Act"), (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein, being hereinafter
referred to herein as the "Exchange Documents"). The Corporation has furnished
to the Purchaser true and complete copies of the Annual Report and the Quarterly
Report. As of their respective filing dates, the Exchange Documents complied in
all material respects with the requirements of the Exchange Act and none of the
Exchange Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were
14
made, not misleading, except to the extent corrected by a subsequently filed
document with the SEC. The financial statements of Corporation, including the
notes thereto, included in the Exchange Documents comply as to form in all
material respects with applicable accounting requirements in effect at the time
of filing of such Exchange Documents and with the published rules and
regulations of the SEC with respect thereto in effect at the time of filing of
such Exchange Document, and have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto) and
present fairly the consolidated financial position of Corporation at the dates
thereof and of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal audit adjustments).
There have been no material adverse changes in the business, operations, or
financial condition of the Corporation that are not reflected in such Exchange
Documents or that have occurred since the period covered by the most recent of
such Exchange Documents.
3.23 Acknowledgement Regarding Securities
The Corporation acknowledges that its obligation to issue Common Stock
upon conversion of the Preferred Shares, in accordance with the terms of this
Agreement and the Certificate of Designations, is absolute and unconditional,
regardless of the dilution that such issuance may have on the ownership
interests of other stockholders of the Corporation. Taking the foregoing into
account, the Corporation's Board of Directors has determined in its good faith
business judgment that the issuance of the Preferred Shares hereunder and the
consummation of the other transactions contemplated hereby are (a) in the best
interests of the Corporation and its stockholders and (b) do not breach (with or
without the passage of time or the giving of notice) any obligations of the
Corporation the result of which would have, individually or in the aggregate, a
material adverse effect on the condition (financial or otherwise), operations,
prospects, business, assets, liabilities or earnings of the Corporation. The
Corporation's Board of Directors has approved the terms of this Agreement and
the Certificate of Designations and the transactions contemplated hereby and
thereby. There are no adjustments, Liens or rights that would be triggered by
the issuance of the Preferred Shares pursuant to agreements between the
Corporation and any lender or holder of an equity interest or other securities
of the Corporation.
3.24 Agreements Regarding Confidential Information, Proprietary
Information and Intellectual Property
The Corporation has caused employees and consultants of the Corporation or
any Subsidiary to execute and deliver such agreements with the Corporation or
any Subsidiary with respect to non-disclosure, non-competition and assignment of
Intellectual Property Rights that provide full and adequate coverage for the
Intellectual Property Rights.
3.25 Registration Rights
Except as provided in the Registration Rights Agreement, and in the
registration rights agreement, dated as of November 20, 2002, between the
Corporation
15
and the holders of the Series A Preferred Stock, copies of which have been
previously delivered to Purchaser, the Corporation is not under any contractual
obligation to register any of its outstanding securities.
3.26 Rights of First Refusal; Voting and Registration Rights
To the best of the Corporation's knowledge, no party has any right of
first refusal, right of first offer, right of co-sale, preemptive right or other
similar right regarding the Corporation's securities. There are no provisions of
the Articles of Incorporation or the Bylaws of the Corporation, no agreements to
which the Corporation is a party and no agreements by which the Corporation, or
the Preferred Shares are bound, which (a) may affect or restrict the voting
rights of the Purchaser with respect to the Preferred Shares in its capacity as
a stockholder of the Corporation, (b) restrict the ability of the Purchaser, or
any successor thereto or assignee or transferee thereof, to transfer the
Preferred Shares, (c) would adversely affect the Corporation's or the
Purchaser's right or ability to consummate the transactions contemplated by the
Transaction Agreements or to comply with the terms of the transactions
contemplated hereby or thereby, (d) require the vote of more than a majority of
the Corporation's issued and outstanding Common Stock, voting together as a
single class, to take or prevent any corporate action, other than those matters
requiring a class vote under Nevada law, or (e) entitle any party to nominate or
elect any director of the Corporation or require any of the Corporation's
stockholders to vote for any such nominee or other person as a director of the
Corporation in each case.
3.27 Issuances Exempt
All shares of Common Stock and other securities issued by the Corporation
prior to or on the Closing Date have been issued in transactions either
registered under the Securities Act of 1933, as amended (the "Securities Act")
or exempt from the registration requirements under the Securities Act and all
applicable state securities or "blue sky" laws, and in compliance with all
applicable corporate laws. The Corporation has not offered any of its Common
Stock or any other securities for sale, or solicited any offers to buy, any of
the foregoing from the Corporation or otherwise approached or negotiated with
any other Person in respect thereof in such a manner as to require registration
under the Securities Act. No holder of any of the Corporation's capital stock
has any rescission or pre-emptive rights.
3.28 No Integrated Offering
Neither the Corporation nor any other Person acting on the Corporation's
behalf has directly or indirectly engaged in any form of general solicitation or
general advertising with respect to the Preferred Shares nor have any of such
Persons made any offers or sales of any security or solicited any offers to buy
any security under circumstances that would require registration of the
Preferred Shares under the Securities Act or cause this offering of Preferred
Shares to be integrated with any prior offering of securities of the Corporation
for purposes of the Securities Act.
16
3.29 Securities Offerings
Subject to the accuracy of the Purchaser's representations and warranties
made in Section 4 hereof to the Corporation, (i) the offer, sale and issuance of
the Preferred Shares to the Purchaser in conformity with the terms of this
Agreement, and (ii) the issuance to the Purchaser of the Reserved Common Shares,
each constitute or will constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act and the registration or
qualification requirements of any applicable state securities or "blue sky"
laws.
3.30 Investment Company Act
The Corporation is not now, and after giving effect to the sale of the
Preferred Shares and the application of the proceeds thereof will not be,
required to register as an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
3.31 Nevada Corporate Statutes
(a) The provisions of Nevada Revised Statutes 78.378-393 (the
"Nevada Acquisition Statute") are or have been made inapplicable to the
Corporation and to the Purchaser, and, after the Closing and the
consummation of the Merger and the other transactions contemplated by the
Transaction Agreements, the Purchaser shall not be an "acquiring person"
or hold a "controlling interest" under, and shall no way be prohibited in
the exercise of its rights, privileges, power or authority with respect to
voting any of its shares of the Corporation's capital stock, by the Nevada
Acquisition Statute.
(b) The provisions of Nevada Revised Statutes 78.411-444 (the
"Nevada Moratorium Statute") are or have been made inapplicable to the
Purchaser, and, after the Closing and the consummation of the Merger and
the other transactions contemplated by the Transaction Agreements, the
Purchaser shall not be an "interested stockholder" for purposes of the
Nevada Moratorium Statute.
(c) The securities issued by the Corporation pursuant to the
Transaction Agreements shall be free and clear of any restrictions imposed
on the Purchaser under the laws of Nevada or any other statute that are
not imposed generally upon the holders of each security, and the Purchaser
shall have available to it all rights and privileges of the securities
which any other stockholder of the Corporation could exercise. The
Corporation has taken all necessary corporate action prior to the Closing,
including but not limited to, amending the Articles of Incorporation and
Bylaws and convening any required stockholders' meetings, to effect the
foregoing representation and warranty contained in this Section 3.31.
17
3.32 Use of Proceeds
The Corporation will utilize the net proceeds from the sale of the
Preferred Shares for general corporate purposes.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Corporation as
follows:
4.1 Due Organization
The Purchaser is a company duly organized and validly existing under the
laws of England and Wales.
4.2 Authorization; Execution and Delivery of Agreement
The Purchaser has all requisite power and authority to execute this
Agreement and the Registration Rights Agreement, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary actions on the part of the Purchaser. This Agreement has been duly
executed and delivered by the Purchaser and this Agreement constitutes the
legal, valid, binding and enforceable obligation of the Purchaser, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
4.3 No Consent or Approval Required
Other than as a result of the reporting requirements of the Exchange Act,
no consent, approval, order or authorization of, or registration, declaration,
filing with or notice to, any authority is required to be made or obtained by
the Purchaser in order to execute or deliver this Agreement or to consummate the
transactions contemplated hereby.
4.4 Brokers' and Finders' Fees
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Purchaser, for which the Corporation will become liable.
4.5 Access to Information
The Purchaser has had adequate opportunity to ask questions of, and
receive answers from, the Corporation's officers, employees, agents,
accountants, and representatives concerning the Corporation's business,
operations, financial condition, assets, liabilities, and all other matters
relevant to its investment in the Preferred Shares.
18
The foregoing, however, does not limit or modify the representations and
warranties of the Corporation in Section 3 of this Agreement or the right of the
Purchaser to rely thereon.
4.6 Acquisition For Own Account
(a) The Purchaser, by reason of its business and financial
experience, has such knowledge, sophistication and experience in business
and financial matters as to be capable of evaluating the merits and risks
of its investment in the Preferred Shares, and is purchasing the Preferred
Shares hereunder for its own account, for investment and not with a view
to, or any present intention of, effecting a distribution of such
securities or any part thereof. The Purchaser acknowledges that the
Preferred Shares to be purchased hereunder and the shares of common stock
issuable upon the conversion thereof have not been registered under the
Securities Act, or the securities laws of any state or other jurisdiction
and cannot be disposed of unless they are subsequently registered under
the Securities Act and any applicable state laws or exemption from such
registration is available. Furthermore, the Purchaser acknowledges that
the Corporation shall place upon each certificate representing the
Preferred Shares and such shares of common stock, a legend substantially
in the following form; provided, however, that the Preferred Shares and
such shares of common stock will not be required to bear a legend more
restrictive than the legend provided for or for a longer period of time
than as provided in the Registration Rights Agreement.
"The securities represented by this certificate have been issued
without registration or qualification under the Securities Act of
1933, as amended (the "Securities Act"), or any applicable state
securities laws (the "State Acts"). Such securities may not be sold,
assigned, transferred or otherwise disposed of, beneficially or on
the records of the company, unless the securities represented by
this certificate have been registered or qualified under the
Securities Act and the applicable State Acts or an exception
therefrom is available."
4.7 Accredited Investor
The Purchaser is an "accredited investor" (as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act).
5. CONDITIONS TO OBLIGATIONS OF THE PURCHASER AT THE CLOSING UNDER THIS
AGREEMENT
The obligation of the Purchaser to consummate the Closing is subject to
the satisfaction of the following conditions on or prior to the Closing:
19
5.1 Corporate Proceedings; Consents; Etc.
All corporate and/or other proceedings to be taken by the Corporation, its
officers, directors and stockholders and all waivers, filings and consents to be
obtained by the Corporation in connection with the transactions contemplated by
the Transaction Agreements shall have been taken or obtained, other than those
filings which must be made after the Closing.
5.2 Blue Sky Matters
All consents, approvals, qualifications and/or registrations required to
be obtained or effected under any applicable state securities or "blue-sky" laws
in connection with the execution and delivery of the Preferred Shares shall have
been obtained or effected.
5.3 Registration Rights Agreement
The Registration Rights Agreement, in the form of Exhibit C attached
hereto, shall have been executed and delivered by the Corporation.
5.4 Merger Agreement
The Merger shall have been consummated pursuant to Section 1.2 of the
Merger Agreement.
5.5 Filings and Documents
(a) The Certificate of Designations in the form of Exhibit B hereto
shall have been duly authorized by the Board of Directors of the
Corporation, duly executed on behalf of the Corporation and filed with the
Secretary of State of the State of Nevada.
(b) The Corporation shall have delivered to the Purchaser a
certificate of the Secretary of the Corporation at the Closing certifying
that attached thereto is: (i) a true and complete copy of the
Corporation's Articles of Incorporation, as in effect at the Closing; (ii)
a true and complete copy of its Bylaws, as in effect at the Closing; (iii)
a true and complete copy of the Certificate of Designations; and (iv) a
true and complete copy of all resolutions duly adopted by its Board of
Directors (x) authorizing the execution, delivery and performance of this
Agreement, and (y) authorizing the consummation of the transactions
contemplated hereby.
5.6 Regulatory Approvals
All approvals and authorizations of, filings and registrations with, and
notifications to, all Governmental Entities required for the consummation of the
transactions contemplated by this Agreement shall have been obtained or made and
shall be in full force and effect.
20
5.7 Representations, Warranties and Covenants
Each representation and warranty of the Corporation shall be true and
correct in all respects as of the Closing Date (other than representations and
warranties that expressly speak only as of a prior date); the Corporation shall
have complied in all respects with its covenants and agreements to be performed
at or prior to the Closing; and the Corporation shall have delivered to the
Purchaser a certificate of the Chief Executive Officer of the Corporation in a
form previously agreed between the parties, certifying as to the foregoing
matters.
5.8 No Litigation
No litigation or other formal proceeding shall have been instituted or
threatened seeking to enjoin any of the transactions contemplated hereby or
seeking damages in respect thereof, and no injunction or temporary restraining
order shall have been issued with respect to any of the transactions
contemplated hereby.
5.9 No Prohibition
There shall be no federal and state statutes, laws, rules, regulations,
codes and ordinances of any Governmental Entity in effect that prohibits the
purchase of the Preferred Shares by the Purchaser or that would otherwise impose
a material penalty upon the Purchaser in respect of the purchase of the
Preferred Shares.
5.10 Opinion of Counsel
The Purchaser shall have received an opinion, dated as of the Closing
Date, of ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇ LLP in the form attached hereto as EXHIBIT D.
6. CONDITIONS TO OBLIGATIONS OF CORPORATION AT THE CLOSING UNDER THIS AGREEMENT
The obligations of the Corporation to consummate the Closing is subject to
the satisfaction of the following conditions on or prior to the Closing:
6.1 Representations and Warranties
Each representation and warranty of the Purchaser shall be true and
correct in all respects as of the Closing Date (other than representations and
warranties that expressly speak only as of a prior date).
6.2 Registration Rights Agreement
The Registration Rights Agreement, in the form of Exhibit C attached
hereto, shall have been executed and delivered by the Purchaser.
21
6.3 No Litigation
No litigation or other formal proceeding shall have been instituted or
threatened seeking to enjoin any of the transactions contemplated hereby or
seeking damages in respect thereof, and no injunction or temporary restraining
order shall have been issued with respect to any of the transactions
contemplated hereby.
6.4 No Prohibition
There shall be no federal and state statutes, laws, rules, regulations,
codes and ordinances of any Governmental Entity in effect that prohibits the
sale of the Preferred Shares by the Corporation or that would otherwise impose a
material penalty upon the Corporation in respect of the sale of the Preferred
Shares.
7. COVENANTS
7.1 Insurance
The Corporation shall as promptly as practicable after the date hereof
purchase professional liability, errors and omissions, general liability,
property and casualty and business interruption insurance as the Board of
Directors deems adequate. The Corporation shall also use its best efforts to
purchase any other type of insurance reasonably requested by the Purchaser. Such
insurance policies shall provide full and adequate coverage for all normal risks
incident to the business of the Corporation and its directors, officers and
other personnel, properties and assets, and shall be in character and amount at
least equivalent to that carried by Persons engaged in similar businesses and
subject to the same or similar perils or hazards.
7.2 Ongoing Filing Requirements
Corporations shall file any Exchange Documents required to be filed when
and as required by the Securities and Exchange Commission.
7.3 Public Disclosure of Transactions
Neither the Corporation nor the Purchaser shall, without the prior consent
of the other party, directly or indirectly issue any public disclosure with
respect to the Transaction Agreements or the investment by the Purchaser
pursuant to, or the other transactions contemplated by, the Transaction
Agreements, except as may be required by applicable law (or under the rules and
regulations of any securities exchange on which the Purchaser's capital stock is
listed), in which case the Corporation and the Purchaser, as the case may be,
shall issue any required statement only after consulting with the other party
and furnishing such disclosure to the other party prior to such consultation.
7.4 Information Rights
(a) From the date hereof and thereafter for so long as the Purchaser
owns any Preferred Shares issued hereunder the Corporation shall, and
shall cause
22
each Subsidiary to, afford to the Purchaser, the affiliates of the
Purchaser and each of their respective officers, directors, employees,
advisors, counsel and other authorized representatives (collectively the
"Representatives"), during normal business hours, reasonable access, upon
reasonable advance notice, to all of the books, records and properties of
the Corporation and any Subsidiary or future subsidiaries and all officers
and employees of the Corporation and any Subsidiary or future
subsidiaries. The Purchaser shall keep confidential information obtained
by it in connection with any such inspection, except that the Purchaser
shall be permitted to disclose the information relating to the
Corporation's business (i) to such of its representatives as need to know
such information relating to the Corporation's business for the sole
purpose of evaluating the business of the Corporation, provided such
Persons are informed of the confidential nature of the information
relating to the Corporation's business and the restrictions imposed
hereby; (ii) to the extent required by law, rule or regulation or legal
process; (iii) to the extent such information relating to the
Corporation's or any Subsidiary's or future subsidiary's breach is or
becomes publicly available other than as a result of a breach of this
Section 7.4(a); or (iv) to the extent the Corporation shall have consented
to such disclosure.
(b) From the Closing Date and thereafter for so long as the
Purchaser owns at least ten percent (10%) of the Preferred Shares issued
pursuant to this Agreement or ten percent (10%) of the Reserved Common
Shares, the Corporation shall furnish promptly to the Purchaser:
(A) notification in writing of the existence of any default
under any material agreement or instrument to which the Corporation
or any Subsidiary or future subsidiary is a party or by which any of
their assets are bound;
(B) upon specific request, copies of all financial statements,
reports, press releases, notices, proxy statements and other
documents sent by the Corporation or any Subsidiary or future
subsidiary to its stockholders generally or released to the public
and copies of all regular and periodic reports, if any, filed by the
Corporation or any Subsidiary or future subsidiary with the SEC, any
securities exchange or the NASD and copies of all reports prepared
for or delivered to the management of the Corporation or any
Subsidiary or future subsidiary by its accountants; and
(C) upon specific request, any other routinely collected
financial or other information available to management of the
Corporation or any Subsidiary or future subsidiary (including
without limitation, routinely collected statistical data).
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7.5 Nevada Corporate Statutes
(a) The Corporation shall at all times maintain provisions of its
Articles of Incorporation and Bylaws to ensure that the Nevada Acquisition
Statute and the Nevada Moratorium Statute are inapplicable to the
Purchaser.
8. INDEMNIFICATION; SURVIVAL
8.1 Indemnification by the Corporation
The Corporation hereby agrees to indemnify and hold harmless the Purchaser
and its respective affiliates, directors, officers and employees (collectively,
the "Purchaser Indemnified Parties") from and against any and all liabilities,
judgments, claims, settlements, losses, damages (including any diminution in
value of its investment in the Corporation), reasonable fees (including
attorneys' and other experts' fees and disbursements), Liens, Taxes, penalties,
obligations and expenses (collectively, "Losses") incurred or suffered by any
such Person arising from, by reason of or in connection with any
misrepresentation or breach of any representation, warranty or covenant of the
Corporation pursuant to this Agreement (for the period such representation,
warranty or covenant survives) or any certificate or other document delivered by
the Corporation under this Agreement. This indemnification provision shall be in
addition to the rights of the Purchaser to bring an action against the
Corporation for breach of any term of the Transaction Agreements.
8.2 Indemnification by the Purchaser
The Purchaser hereby agrees to indemnify and hold harmless the Corporation
and its affiliates, directors, officers and employees (the "Corporation
Indemnified Parties"), from and against any and all Losses incurred or suffered
by any such Person arising from, by reason of or in connection with any
misrepresentation or breach of any representation, warranty or covenant of the
Purchaser contained in this Agreement (for the period such representation,
warranty or covenant survives) or any certificate or other document delivered by
the Purchaser under this Agreement. Notwithstanding anything else to the
contrary, the Purchaser's maximum liability in the Agreement under this Section
8.2 shall not exceed the amount of the purchase price paid by the Purchaser
hereunder. This indemnification provision shall be in addition to the rights of
the Corporation to bring an action against the Purchaser for breach of any term
of this Agreement and the Registration Rights Agreement.
8.3 Procedures Relating to Third Party Claims
A party seeking indemnification pursuant to Section 8.1 or 8.2 (an
"Indemnified Party") shall give prompt notice to the party from whom such
indemnification is sought (the "Indemnifying Party") of the assertion of any
claim or assessment, or the commencement of any action, suit or proceeding, by a
third party in respect of which indemnity may be sought hereunder (a "Third
Party Claim") and will give the Indemnifying Party such information with respect
thereto as the Indemnifying Party may reasonably request, but no failure to give
such notice shall relieve the
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Indemnifying Party of any liability hereunder (except to the extent the
Indemnifying Party has suffered actual and material prejudice thereby). The
Indemnifying Party shall have the right, exercisable by written notice (the
"Notice") to the Indemnified Party within 14 days of receipt of notice from the
Indemnified Party of commencement of or assertion of any Third Party Claim, to
assume the defense of such Third Party Claim, using counsel selected by the
Indemnifying Party and reasonably acceptable to the Indemnified Party; provided,
that the Indemnifying Party shall not have the right to assume a Third Party
Claim if the Indemnified Party shall have been advised in writing by counsel
that a conflict will arise in the event both the Indemnified Party and the
Indemnifying Party are represented by the same counsel with respect to the Third
Party Claim, in which case such Indemnified Party shall have the right to
control the defense of such Third Party Claim and all Losses in connection
therewith shall be reimbursed by the Indemnifying Party from time to time upon
demand of the Indemnified Party. In addition, if the Indemnifying Party fails to
give the Indemnified Party the Notice complying with the provisions stated above
within the stated time period, the Indemnified Party shall have the right to
assume control of the defense of the Third Party Claim and all Losses in
connection therewith shall be reimbursed by the Indemnifying Party from time to
time upon the demand of the Indemnified Party. In no event may any Indemnifying
Party settle or compromise any Third Party Claim without the prior written
consent of an Indemnified Party.
8.4 Survival of Representations, Warranties and Agreements
Notwithstanding any investigation conducted or notice or knowledge
obtained by or on behalf of any party hereto, each representation and warranty
in this Agreement and each agreement or covenant in this Agreement shall survive
the execution and delivery of this Agreement, the Closing and any termination of
this Agreement pursuant to Section 14 until 90 days after the filing of audited
accounts for the year to December 31, 2005.
9. EXPENSES
The Corporation, on the one hand, and Purchaser on the other hand, each
shall bear its own expenses in connection with the preparation for and
consummation of the transactions contemplated by this Agreement.
10. NOTICES
All notices, advice and communications to be given or otherwise made to
any party to this Agreement shall be deemed to be sufficient if contained in a
written instrument delivered in person or by telecopier or duly sent by first
class registered or certified mail, return receipt requested, postage prepaid,
or by overnight courier, or by electronic mail, with a copy thereof to be sent
by mail (as aforesaid) within 24 hours of such electronic mail, addressed to
such party at the address set forth below or at such other address as may
hereafter be designated in writing by the addressee to the addresser listing all
parties:
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(a) if to the Corporation, to:
Vital Living, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
Telecopier: ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopier: ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
-and-
(b) if to the Purchaser, to:
SkyePharma PLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attention: Company Secretary
Telecopier: ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇
▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance herewith. Any
such notice or communication shall be deemed to have been delivered and received
(i) in the case of personal delivery, delivery by telecopier or transmittal by
electronic mail, on the date of such delivery, (ii) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent and (iii) in the case of mailing, on the third business day following
that on which the piece of mail containing such communication is posted. As used
in this Section 10, "business day" shall mean any day other than a day on which
banking institutions in the State of New York are legally closed, or authorized
to close, for business.
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11. SUCCESSORS AND ASSIGNS
Except as otherwise expressly provided herein, this Agreement shall bind
and inure to the benefit of the parties hereto and the respective successors and
permitted assigns of the parties hereto. Neither this Agreement, nor the rights
and obligations hereunder, is assignable by any party hereto (except to a
successor-in-interest by operation of law) without the prior written consent of
the other. Any such purported assignment made without such prior written consent
shall be null and void. No Person other than the parties hereto, the Purchaser
Indemnified Parties (in respect of Section 8 only) and the Corporation
Indemnified Parties (in respect of Section 8 only) and their respective
successors and permitted assigns shall have any rights or claims under this
Agreement.
12. AMENDMENTS
The terms and provisions of this Agreement may only be amended or waived
either (a) with the written consent of the parties hereto or (b) in a writing by
the party against whom such amendment or waiver is sought to be enforced.
13. ENTIRE AGREEMENT
This Agreement and the other writings or documents referred to herein or
delivered pursuant hereto which form a part hereof contain the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior and contemporaneous arrangements or understandings with respect thereto.
14. TERMINATION
This Agreement may be terminated by either party if the other party is in
material breach of this Agreement and such breach is not cured within twenty-one
days following the delivery of written notice thereof. Such termination right
may be exercised only by the delivery of written notice of such termination by
the terminating party to the other party and such termination will not relieve
any party of liability for its prior breach. This Agreement may also be
terminated by the mutual written consent of the parties hereto except that each
representation and warranty in this Agreement and each agreement or covenant in
this Agreement shall survive such termination.
15. COUNTERPARTS
This Agreement may be executed in any number of separate counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
16. HEADINGS
The headings of the various sections of and schedules to this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
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17. GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM
This Agreement shall be construed in accordance with the laws of the State
of New York, without regard to conflict of law provisions thereof. Each party
hereto agrees that it shall bring up any action or proceeding in respect of any
claim arising out of or related to this agreement or the transactions contained
in and contemplated by this Agreement, whether in tort or contract or at law or
in equity, exclusively in the United States District Court for the Southern
District of New York or, if such court is not available, the Supreme Court of
the State of New York for the county of New York (the "Chosen Courts") and
solely in connection with claims arising under this Agreement or the
transactions contained in or contemplated by this Agreement (i) irrevocably
submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any
objection to laying venue in any such action or proceeding in the Chosen Courts
and agrees not to commence any action in respect of any such claim in any other
court or forum, (iii) waives any objection that the Chosen Courts are an
inconvenient forum or do not have jurisdiction over any party hereto, (iv)
waives any right to a trial by jury and (v) agrees that service of process upon
such party in any such action or proceeding shall be effective if notice is
given in accordance with Section 10 of this Agreement. Without limiting the
foregoing, each of the Corporation and the Purchaser hereby appoints, in the
case of any such action or proceeding brought in the courts of or in the State
of New York, CT Corporation system with its offices at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇ to receive, for it and on its behalf, service of
process in the State of New York with respect thereto, provided the Corporation
and the Purchaser may appoint any other Person, reasonably acceptable to the
other party, with offices in the State of New York to replace such agent for
service of process upon delivery to the other party of a reasonably acceptable
agreement of such new agent agreeing to act.
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IN WITNESS WHEREOF, the undersigned have caused this Purchase Agreement to
be executed as of the date first written above.
VITAL LIVING, INC.
By:
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman of the Board and
Chief Executive Officer
By:
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
SKYEPHARMA PLC
By:
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Finance Director
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